tag:blogger.com,1999:blog-1240730580083032584.post709620239831309817..comments2024-02-26T22:53:09.562-08:00Comments on Money, Markets, and Misperceptions: "We're All [mostly] Monetarists Now", not New KeynesiansUnknownnoreply@blogger.comBlogger21125tag:blogger.com,1999:blog-1240730580083032584.post-65509283089900305902014-02-19T14:52:23.523-08:002014-02-19T14:52:23.523-08:00I don't think it is too far outside your reach...I don't think it is too far outside your reach if it is. Plenty of narrative and the models are relatively simple.James Catonhttps://www.blogger.com/profile/14807595180565488334noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-10997144134962805792014-02-19T13:28:58.997-08:002014-02-19T13:28:58.997-08:00James, thanks. BTW, you have an interesting blog. ...James, thanks. BTW, you have an interesting blog. I haven't read your papers yet, but they look interesting by their abstracts (the ones you posted links to having to do with the gold standard). Suitable for a layman such as myself?Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-7393536469916553332014-02-19T12:53:07.536-08:002014-02-19T12:53:07.536-08:00As long as Japan's exchange rate with the doll...As long as Japan's exchange rate with the dollar remains stable it should not experience price fluctuations that are much different than that experienced in the U.S..James Catonhttps://www.blogger.com/profile/14807595180565488334noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-88419614101441649352014-02-19T12:47:20.173-08:002014-02-19T12:47:20.173-08:00I'm not very familiar with the situation. From...I'm not very familiar with the situation. From a quick search I have found:<br /><br />Japan's monetary base is about 2 X 10^14 yen. Expansion is expected to be about 7 X 10^13 per year. That means the base will be expanding at about 35% per year. I'm not familiar with banking practices in Japan, so I cannot assume that all of the money will end up in circulation. Remember that, in the U.S., the Fed more than doubled the base, but much of that money is sitting in its own vaults.<br /><br />Central banks have to consider the policies of one another. In looking at the dollar yen chart, it looks like the yen was strengthening after the 2008 financial crisis, after which time the Fed has been expanding. When prices fall continually, that discourages growth. The expansion in Japan seems to have off set this valuation. Notice that the exchange rate stabilized after they expanded the base.<br /><br />Again, Sumner and Christensen probably know more.James Catonhttps://www.blogger.com/profile/14807595180565488334noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-11932277319251733682014-02-19T12:19:08.567-08:002014-02-19T12:19:08.567-08:00James, let me ask you a direct question on Vincent...James, let me ask you a direct question on Vincent's behalf: will Japan experience hyper-inflation sometime over the next two years (defined any way you like)? If not, why not? Any guess about how high annual inflation might get in Japan over the next two years?Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-47084369791718109172014-02-19T12:15:03.484-08:002014-02-19T12:15:03.484-08:00Vincent, I think James is spot-on regarding Lars C...Vincent, I think James is spot-on regarding Lars Christensen and undeveloped economies like Argentina. He has a lot of material on that subject, and you might have better luck engaging him on that specific issue.<br /><br />But I would love to hear James' response to your ideas about the gold standard between WWI and WWII, or even pre-WWI. I suspect you two would have very different ideas on that.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-52236118874276671372014-02-19T12:09:58.383-08:002014-02-19T12:09:58.383-08:00i.e. do you really mean "anti-Monetarist?&quo...i.e. do you really mean "anti-Monetarist?"Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-45844411672006295852014-02-19T12:08:17.328-08:002014-02-19T12:08:17.328-08:00Vincent, what do you think "Keynesian" m...Vincent, what do you think "Keynesian" means and what do you think "anti-Keynesian" means? Have you read this for example?:<br /><br />http://uneasymoney.com/2014/02/13/what-does-keynesian-mean/<br /><br />What is your response?Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-39517881867052872362014-02-18T16:24:42.047-08:002014-02-18T16:24:42.047-08:00It seems to me that people who are not anti-keynes...It seems to me that people who are not anti-keynesians usually don't think there is any risk of hyperinflation. Even in countries that later got hyperinflation. I also think they usually don't really understand hyperinflation and that is why they discount the risk of hyperinflation. So that is why I would like to debate the explanation for hyperinflation.Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-25450382131066431062014-02-18T16:03:35.609-08:002014-02-18T16:03:35.609-08:00Lets debate the explanation for hyperinflation. ...Lets debate the explanation for hyperinflation. I have a collection of explanations using a variety of theories. Do you agree with any of these or do you have another explanation?<br /><br />http://howfiatdies.blogspot.com/2013/09/hyperinflation-explained-in-many.htmlVincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-1638039833090922082014-02-18T15:50:00.009-08:002014-02-18T15:50:00.009-08:0026% per year is not a very high threshold. It is n...26% per year is not a very high threshold. It is not a comfortable economic situation, but markets are good at mitigating damage from that sort of inflation.<br /><br />I'm still not sure what we are debating. I have not said that we live under an ideal system or that I support hyperinflation. That latter would be an odd statement for anyone to make.James Catonhttps://www.blogger.com/profile/14807595180565488334noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-15893326898085571942014-02-18T15:45:09.716-08:002014-02-18T15:45:09.716-08:00The first thing in my FAQ is about the definition....The first thing in my FAQ is about the definition. I like 100% in 3 years, or sort of 26% per year.<br /><br />So if Japan gets hyperinflation will you then agree that the US can get hyperinflation?Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-70035378825576328462014-02-18T15:38:38.477-08:002014-02-18T15:38:38.477-08:00Pardon my lack of clarity. By modern I mean develo...Pardon my lack of clarity. By modern I mean developed. The turmoil in Venezuela is a sign that it is not developed. Argentina devalued, but it is in the face of exacerbated dollar demand as other monetary regimes tighten. Lars Christensen has much to say on these issues, and he is usually right.<br /><br />What is your definition of hyperinflation? I've heard some say 20 percent price increases per month. Others more. Others less. James Catonhttps://www.blogger.com/profile/14807595180565488334noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-32650783653714574342014-02-18T15:30:30.764-08:002014-02-18T15:30:30.764-08:00You are aware of the very modern Argentina and Ven...You are aware of the very modern Argentina and Venezuela and what their central banks are doing at this very moment?<br /><br />I don't believe any central bank ever decided to make hyperinflation or thought it was in their benefit to do so. Hyperinflation is where the market is rejecting a currency, not something planned by the central bank.<br /><br />http://howfiatdies.blogspot.com/2012/10/faq-for-hyperinflation-skeptics.htmlVincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-70579743595473372532014-02-18T08:32:26.149-08:002014-02-18T08:32:26.149-08:00Vincent,
I am not sure what you are suggesting. C...Vincent,<br /><br />I am not sure what you are suggesting. Central banks will have a hard time creating hyperinflation in the modern world. This is not to say that they cannot, but that there is little benefit for them to do so. Seigniorage is no longer a viable source for government revenue. The exeception would be if a government defaults on its creditors, but that would be a one time shock to the economy, not a hyperinflation.James Catonhttps://www.blogger.com/profile/14807595180565488334noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-86859640188742101212014-02-17T17:37:18.824-08:002014-02-17T17:37:18.824-08:00I am an anti-keynesian in that I think making mone...I am an anti-keynesian in that I think making money and lowering interest rates is not a long term win. I do not deny that in the short term it can make GNP go up (in part because government spending is part of GNP). But I think it is a short term gain and long term loss. In particular if you get hyperinflation the loss wipes out all previous gains.<br /><br />http://howfiatdies.blogspot.com/2013/09/hyperinflation-explained-in-many.htmlVincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-48913923930113426692014-02-14T05:57:03.012-08:002014-02-14T05:57:03.012-08:00Yep. The ISLM is a halfway house between monetaris...Yep. The ISLM is a halfway house between monetarist and Wicksellian.<br /><br />If the central bank sets an interest rate, the LM curve is horizontal, which is how some textbooks do it nowadays, and they call the LM curve the MP (monetary policy) curve. Then it's pure Wicksellian. M doesn't matter.<br /><br />"Do you know if anyone has proposed this?"<br /><br />No. Not sure. Maybe someone has. There was a small argument between me and Simon about a year back, with Simon wanting IS/MP and me wanting AS/AD. Worth doing a post on anyway.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-18837870667945431422014-02-14T05:48:38.970-08:002014-02-14T05:48:38.970-08:00Any New Keynesian model with a Taylor Rule in it. ...Any New Keynesian model with a Taylor Rule in it. Or anything at all like a Taylor Rule, where the central bank sets a nominal rate of interest. And that is (nearly?) all New Keynesian models nowadays.<br /><br />Woodford in particular. The title of his book is "Interest and Prices" (unlike Patinkin's "Money Interest and Prices". It's monetary economics, without money.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-6785094496275709592014-02-14T05:32:40.162-08:002014-02-14T05:32:40.162-08:00This Wicksellian-Monetarist division, let's ca...This Wicksellian-Monetarist division, let's call it, is especially apparent when Keynes debates the old monetarists. They talk past each other as Keynes relies on the interest rate for his analysis of monetary policy and the monetarists talk about demand for money and increases in the money stock.<br /><br />In modern analysis, we might say the IS-LM, which is more Wicksellian, and the monetarist AD-AS analysis, with a unit elastic AD-curve, represent this split. Do you know if anyone has proposed this?James Catonhttps://www.blogger.com/profile/14807595180565488334noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-18909109175581191012014-02-14T05:21:30.050-08:002014-02-14T05:21:30.050-08:00It should be supply. I fixed it
You are right abo...It should be supply. I fixed it<br /><br />You are right about the Wicksell. This is again the trouble with generalizations. Which New Keynesian models do you have in mind? James Catonhttps://www.blogger.com/profile/14807595180565488334noreply@blogger.comtag:blogger.com,1999:blog-1240730580083032584.post-32617565951973135732014-02-14T04:06:13.454-08:002014-02-14T04:06:13.454-08:00Good post!
But there is also a strong Neo-Wicksel...Good post!<br /><br />But there is also a strong Neo-Wicksellian strand in New Keynesian macro, after Woodford. Monetary policy is interest rate policy, rather than money supply policy.<br /><br />I think there might be two typos in this line?: "Most theories from the time period implicitly concerned themselves with upward sloping short run aggregate demand curves, though they did point this out explicitly."<br /><br />Should "demand" be "supply"? Is there a "not" missing? Or did I totally misunderstand?Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.com